Tennessee § 56-7-105 - Additional liability upon insurers and bonding companies for bad-faith failure to pay promptly.

§ 56-7-105. Additional liability upon insurers and bonding companies for bad-faith failure to pay promptly.

The insurance companies of this state, and foreign insurance companies and other persons or corporations doing an insurance or fidelity bonding business in this state, in all cases when a loss occurs and they refuse to pay the loss within sixty (60) days after a demand has been made by the holder of the policy or fidelity bond on which the loss occurred, shall be liable to pay the holder of the policy or fidelity bond, in addition to the loss and interest on the bond, a sum not exceeding twenty-five percent (25%) on the liability for the loss; provided, that it is made to appear to the court or jury trying the case that the refusal to pay the loss was not in good faith, and that the failure to pay inflicted additional expense, loss, or injury including attorney fees upon the holder of the policy or fidelity bond; and provided, further, that the additional liability, within the limit prescribed, shall, in the discretion of the court or jury trying the case, be measured by the additional expense, loss, and injury including attorney fees thus entailed. In any action against an unauthorized foreign or alien insurer or bonding company upon a contract of insurance or fidelity bond issued or delivered in this state to a resident of this state or to a corporation authorized to do business in this state, if the insurer or bonding company has failed for thirty (30) days after demand prior to commencement of the action to make payment in accordance with the terms of the contract or fidelity bond, and it appears to the court that the refusal was vexatious and without reasonable cause, the court may allow to the plaintiff a reasonable attorney fee and include the fee in any judgment that may be rendered in the action. The fee shall not exceed twelve and one half percent (12.5%) of the amount that the court or jury finds the plaintiff is entitled to recover against the insurer or bonding company, but in no event shall the fee be less than twenty-five dollars ($25.00). Failure of an insurer or bonding company to defend the action shall be deemed prima facie evidence that its failure to make payment was vexatious and without reasonable cause. Acts 1901, ch. 141, § 1; Shan., § 3369a141; Code 1932, § 6434; Acts 1955, ch. 2, § 4; T.C.A. (orig. ed.), § 56-1105; Acts 1981, ch. 354, § 1; 2000, ch. 701, § 1. Cross-References. Automobile liability insurance, survival of cause of action, assignability, § 20-5-120 . Legal insurance, title 56, ch. 43. Payment to health care agency of assigned insurance benefits, § 68-11-219 . Report to commissioner of revenue upon approval of proof of death by insurance company, § 67-8-424 . Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Beneficial and Benevolent Associations, § 6; 6 Tenn. Juris., Constitutional Law, § 58; 15 Tenn. Juris., Insurance, §§ 39, 77, 82-85, 87-97, 120, 131, 141-147. Law Reviews. Alternative Dispute Resolution in the Personal Injury Forum (William P. Zdancewicz), 26 U. Mem. L. Rev. 1169 (1996). Bad Faith: Building a House of Straw, Sticks, or Bricks (Constance A. Anastopoulo), 42 U. Mem. L. Rev. 687 (2012). Civil Procedure — Long Arm Statute — Davenport v. State Farm Mut. Auto. Ins. Co.: Has Tennessee Fully Embraced the “Minimum Contacts” Test?, 19 Mem. St. U.L. Rev. 117 (1989). Insurance — Accidental Means & Accidental Death — Harrell v. Minnesota Mutual Life Insurance: Tennessee's Emergence From the Serbonian Bog?, 27 U. Mem. L. Rev. 745 (1997). Insurance — Myint v. Allstate Insurance Co.: The Tennessee Consumer Protection Act and the Insurance Industry, 30 U. Mem. L. Rev. 207 (1999). Just How “Formal” Does an Insured's “Demand” Have To Be Under Tennessee's Insurer Bad-Faith Statute Anyway? An Argument for Why Written Formal Demand Should Be Required Under Section 56-7-105(a) of the Tennessee Code, 30 U. Mem. L. Rev. 239 (2000).